The wind of change swept through the Spanish banking sector as last year’s rate hikes took their toll and then began feeding profit. Banks in Spain reported earnings of 19.430 billion euros for 2022, up by 4.983 billion and about 34.5% from 2021, according to figures published by the Bank of Spain. To put that in perspective, this marks the strongest annual profit in the sector since 2007, when a real estate boom pushed record highs to 25.111 billion euros. Even after adjusting for inflation, current profits remain the highest since 2008, with nominal earnings at 18.421 billion and 23.109 billion euros when applying the cumulative CPI.
Evaluating 2007 and 2008 as benchmarks is not straightforward because that period was dominated by the housing bubble and later revealed heavy losses during the following years and the largest banking crisis. More importantly, last year’s profits dwarfed the long-run average since 1992, the start of the Bank of Spain’s historical series. In nominal terms, annual profits reached 5.871 billion, and when adjusted for inflation, 8.675 billion. These figures highlight a revenue surge that goes beyond simple price effects.
Rising official rates have been a key driver. The European Central Bank has sought to curb inflation, and this environment has widened banks’ net interest margins, the income earned from the spread between loan yields and deposit costs. In the last year, the interest margin stood at 24.435 billion euros, with an increase of 2.112 billion and about 9.4% higher than the prior year, the strongest level since 2021. The ECB’s move to retain restrictive rates in the first full year after policy normalization helped revitalize the eurozone economy, supporting bank earnings through loan demand and pricing power.
Calviño confirms that inflation will drop in March and prices will stabilize in summer
Greater customer profitability
Commissions within the sector declined by 6.9%, reaching 12.958 billion euros. When combined with interest margin, the total revenue from core activities reached 37.393 billion euros, boosted by government measures such as temporary and extraordinary taxes on banks. The final tax impact varies by item, with an anticipated component of 1.274 billion euros. These tax dynamics and fee structures shaped the year’s profitability profile across most institutions.
On the income statement, portfolios of variable income investments contributed 66% more than the prior year, totaling 15.823 billion euros. Overall industry revenue rose by about 16.7% to 53.215 billion euros. Provisions for potential losses fell by 36%, arriving at 6.101 billion euros. As a result, the reported net profit climbed more than twofold, increasing by roughly 110% to 22.108 billion euros.
Less extraordinary, more tax
The improvement in bottom-line results was tempered by two main factors. First, there were no comparable extraordinary gains in 2022, whereas 2021 benefited from capital gains related to the Bankia integration by CaixaBank and a public offering linked to a direct line with a banker. Second, the corporate tax burden nearly doubled, to around 2.150 billion euros, driven by a higher post-tax outcome and the use of tax assets that banks had built up from provisions during the financial crisis and the early stages of the pandemic. This represents the highest tax expense since 2017.
The total profitability of the sector, including international operations, will be clarified when the Bank of Spain releases a full industry report in April. Ten major banks already published their results, reporting 21.678 billion euros in aggregate profits for the year, about 4% above 2021. The broader sector’s figure is expected to stay near the 23.592 billion euros posted in 2021 due to the relatively smaller market shares of other institutions.